SEC Securities Fraud Investigations Fell Sharply Over Last Eight Years

New data compiled by a Syracuse University research group shows that the number of cases of fraudulent stock schemes investigated by federal officials has declined...

January 8, 2009

New data compiled by a Syracuse University research group shows that the number of cases of fraudulent stock schemes investigated by federal officials has declined sharply over the last eight years, suggesting that the Bush Administration has not adequately overseen the financial industry. Legal and financial experts attribute the lower level of oversight in part to reductions in the staffing of the Securities and Exchange Commission (SEC) and the shifting of resources at the FBI toward terrorism.

As the controversy over the $50 billion-plus Ponzi scheme organized by Bernard Madoff is receiving widespread attention, the Syracuse group says that data from the Justice Department indicates that federal officials will have made the fewest prosecutions for securities fraud this year than in any year since at least 1991. In the first 11 months of this year, 133 cases of securities fraud have been prosecuted, compared with 437 cases in 2000 and a record of 513 cases in 2002, the year of the collapses of Enron and WorldCom. Investigations by the SEC that led to Justice Department prosecutions for securities fraud fell from 69 in 2000 to 9 in 2007.